Friday, October 14, 2016

Where Will All the Money Go 
When All Three Market Bubbles Pop?
It Could Send Precious Metals, Commodities, Cryptocurrencies Through The Roof
Charles Hugh Smith* wonders which asset class will money go to once all the currently correlated bubble markets of stocks, bonds & real estate burst .. "One of the consequences of eight years of central bank easing and intervention is that these asset classes are tightly correlated. Free money for financiers has sought a yield wherever it can find one, and the result is every asset class with a yield has become tightly correlated. This moots the time-honored strategy of managing risk by shifting capital from an over-valued asset class into an under-valued asset class. When all the major asset classes are in bubbles, there is no 'cheaper' asset class to shift capital into. The only asset classes that are not in bubbles don't offer yields: precious metals and commodities are value plays or scarcity plays, but institutions that require a yield may not be able to shift much capital into these value/scarcity plays. Hot money, however, can buy precious metals, oil futures, bitcoin, etc. The problem is the markets that capital will flee once the overlapping bubbles pop are worth tens of trillions of dollars each, and the markets that are not correlated to stocks/ bonds /real estate are an order of magnitude smaller .. If the bubbles in bonds, stocks and real estate all pop, what markets will be left that can absorb trillions of hot money sloshing around? the short answer is: none. The chaos that will arise as trillions of dollars, yen, yuan and euros, etc. try to crowd through the fire exits as the asset bubbles pop will be monumental, and the the spikes in small asset class prices as the hot money floods in will be equally monumental."
LINK HERE to the essay

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